16 Jun 2022
Financing nature-positive transition in the agriculture sector
A more sustainable solution is required for the UK’s food system writes Maria Carvalho, NatWest Group's Head of Climate Economics and Data.
A more sustainable solution is required for the UK’s food system, ensuring longer-term benefits and security to farmers, consumers, the economy, and the planet.
As such, significant change is needed across the entire food system to address the multiple environmental, societal and economic issues embedded in our current agricultural systems. Foremost among these are the twin crises of climate change and biodiversity loss, alongside the economic pressures of increasing input prices for farmers.
Bridging the investment gap
Private finance has a powerful role to play in accelerating the transition to regenerative agriculture by actively scaling the information and access to green finance specifically tailored to farmers and food producers.
- Possible solutions could include farmers and food supply chain businesses working together to reduce emissions and store carbon. By using accurate measurements for on-farm reduction and sequestration schemes, food businesses can verifiably reduce their own scope 3 (supply-chain) emissions through direct financial support to farmers. In this way, the emissions reduction benefit is shared between the farmer and the buyer.
- This requires government, farmers and the food supply chain to agree on a common set of metrics that comprehensively measures the sustainable outcomes from the change in farming practices. In doing so, farmers can be rewarded for achieving targets by the government, their supply chain customers, and even other private sector players who would like to support nature-based solutions in the UK.
- The financial sector can also be part of validating this mechanism, bringing a creditworthiness perspective to these dynamics. By recognising that emission reduction efforts by farmers will make their businesses more attractive to their retail customers (as well as helping to reduce risk), banks can subsequently reflect this in the cost of lending.
- Banks can also partner with food retailers to provide transition finance to their farmers to reduce emissions in a way that is comprehensive and scalable.
- More broadly, financing is also needed to provide innovative solutions in managing farms and the industrial food system. For instance, satellite data can support farmers in sustainably managing their farms within a broader ecological system, while also preparing for extreme weather shocks and adapting to long-term weather effects. Blockchain solutions can also enable traceability and transparency on the carbon footprint of food production.
To find out more about our support for the agriculture sector, please contact Ian Burrow, Head of Agriculture and Energy: Ian.Burrow@natwest.com
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